Magazine article Government Finance Review

Supreme Court Watch: During the 2013-2014 Supreme Court Term, the State and Local Legal Center Filed Amicus Briefs Addressing Issues Including the Constitutionality of State and Local Tax Schemes, an Interpretation of the Costly Fair Labor Standards Act, and the Proper Use of Administrative Procedure

Magazine article Government Finance Review

Supreme Court Watch: During the 2013-2014 Supreme Court Term, the State and Local Legal Center Filed Amicus Briefs Addressing Issues Including the Constitutionality of State and Local Tax Schemes, an Interpretation of the Costly Fair Labor Standards Act, and the Proper Use of Administrative Procedure

Article excerpt

The 2013-2014 Supreme Court term was an active one for the State and Local Legal Center and its member organizations, which include GFOA, as well as the National Governors Association, the National Conference of State Legislatures, the Council of State Governments, the U.S. Conference of Mayors, the National League of Cities, the National Association of Counties, the International City/ County Management Association, and the International Municipal Lawyers Association. In all, the Legal Center filed or is preparing to file nine amicus or "friend of the court" briefs with the United States Supreme Court.

ABOUT THE STATE AND LOCAL LEGAL CENTER

The State and Local Legal Center, which just celebrated its 30th anniversary, has played a key role in ensuring that states and local governments are effectively represented before the Supreme Court by coordinating, drafting, and submitting amicus briefs that help to further define and clarify the arguments made by the parties to the case, and shed more light on the broader concerns of states and localities, particularly in such areas as federalism and government authority.

In 2014, the GFOA has participated either as an amicus or an advisor on several briefs submitted to the U.S. Supreme Court through the efforts of the State and Local Legal Center. The briefs address issues including the constitutionality of state and local tax schemes, an interpretation of the costly Fair Labor Standards Act, and the proper use of administrative procedure. All are significant for state and local governments, and to GFOA members, because of their implications for preserving federalism and limiting the scope of costly regulatory activities that are often imposed on states and localities. GFOA members can expect the court to issue decisions in these cases in the coming months, during the 2014-2015 term.

INTERPRETATIONS OF TAXING AUTHORITY

In early August 2014, the State and Local Legal Center filed a brief in the case of Comptroller v. Wynne. Here, the Supreme Court is asked to determine whether the U.S. constitution requires states to give a credit for taxes paid on income earned out of state.

The Wynnes of Howard County, Maryland, received S-corporation income that was generated and taxed in numerous states. While Maryland law allowed the Wynnes to receive a tax credit against their Maryland state taxes for income taxes paid to other states, it did not allow them to claim a credit against their Maryland county taxes. The Wynnes challenged Maryland law, and the highest state court held that Maryland's failure to grant a credit against Maryland's county tax violated the U.S. Constitution's dormant Commerce Clause, which denies states the power to unjustifiably discriminate against or burden interstate commerce. The Maryland Court of Appeals noted that if every state imposed a county tax without a credit, interstate commerce would be disadvantaged. Taxpayers who earn income out of state would be "systematically taxed at higher rates relative to taxpayers who earn income entirely within their home state."

The State and Local Legal Center's amicus brief challenges the Maryland Court of Appeals decision on several grounds. First, the brief argues that the power of state and local governments to tax the income of their residents, wherever earned, has been upheld repeatedly by the Supreme Court. Second, the brief maintains that the scope of the "dormant Commerce Clause" regarding individual non-resident income taxes has not been clearly defined by the Court and should not now be construed to mandate credits. Third, the brief argues that taxation is a legislative matter that should not be usurped by the judiciary.

The brief also discusses the difficult tax policy choices that face state and local leaders. As an example, if Maryland were required to provide a dollar-for-dollar tax credit, a neighbor with substantial out-of-state income would contribute significantly less to pay for local services than a neighbor earning the same income in-state, even though both take equal advantage of local services. …

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